A secured business loan is a type of financing that is provided with a personal guarantee or in exchange for the pledge of assets as security. Secured business loans, in contrast to unsecured business loans call for the deposit of security before receiving money from financial institutions like banks and NBFCs. If any borrower defaults, assets like real estate, land, and machinery must be offered as a backup.
Customers guarantee to lenders that the borrowed funds will be promptly repaid in the form of EMIs but if he fails, the lender has the full right to reclaim the deposited security or assets held as collateral from the borrower. Compared to unsecured loans, the interest rates offered by secured business loans are lower and more affordable. As collateral is pledged to the lender, even the repayment period that is offered by the lender is lengthier.